Estimating the Social Cost of Carbon: Research Progress and Policy Implications

Abstract

Abstract: The social cost of carbon (SCC) is a quantitative benchmark and an important analytical tool for climate policy. There have been extensive related international experience in estimating SCC values and applying SCC in policy analysis and formulation, but there is no official SCC calculation result in China. To provide a useful reference for improving the carbon peak and carbon neutrality policy system, this paper sorts out the relevant research results of SCC from the aspects of conceptual analysis and comparison, measurement methods and key parameters, policy significance and international practices and focuses on controversial issues such as the relationship between SCC and carbon pricing, international SCC and regional SCC, equity weighting, uncertainty, etc. This paper believes that in the process of building and improving the carbon peak and carbon neutrality policy system in China, we can try to introduce SCC valuation as a quantitative benchmark for carbon pricing and carbon trading tools. Based on the status quo of carbon emissions and carbon trading practices in China, as well as the characteristics of existing institutional frameworks and policy tools, we can also promote various carbon trading tools to manage carbon emissions coordinately, keep carbon prices within a reasonable range, and balance the fair relationship between generations, industries, and regions in the process of reducing carbon emissions.

Key words: social cost of carbon, carbon pricing, fairness weighting, uncertainty

Wu Bingbing, Li Xiuting, Ouyang Lu. Estimating the Social Cost of Carbon: Research Progress and Policy Implications[J]. Management Review, 2025, 37(5): 53-66.

References

[1] Nordhaus W. D. Economic Growth and Climate:The Carbon Dioxide Problem[J]. The American Economic Review, 1977,67(1):341-346
[2] Nordhaus W. D. The'Dice' Model:Background and Structure of a Dynamic Integrated Climate-Economy Model of the Economics of Global Warming[R]. Cowles Foundation Discussion Papers, 1992
[3] Nordhaus W. D. Optimal Greenhouse-Gas Reductions and Tax Policy in the "DICE" Model[J]. The American Economic Review, 1993,83(2):313-317
[4] Fankhauser S. The Social Costs of Greenhouse Gas Emissions:An Expected Value Approach[J]. The Energy Journal, 1994,15(2):157-184
[5] IPCC. IPCC Second Assessment Climate Change 1995[R]. Intergovernmental Panel on Climate Change, 1995
[6] Pearce D. The Social Cost of Carbon and Its Policy Implications[J]. Oxford Review of Economic Policy, 2003,19(3):362-384
[7] Tol R. S. J. The Social Cost of Carbon[J]. Annual Review of Resource Economics, 2011,3:419-443
[8] Nordhaus W. Estimates of the Social Cost of Carbon:Concepts and Results from the DICE-2013R Model and Alternative Approaches[J]. Journal of the Association of Environmental and Resource Economists, 2014,1(1/2):273-312
[9] 张宇翔,谭德庆. 双重碳政策对制造型企业决策影响及政府调控策略研究[J]. 管理评论, 2022,34(2):303-314 Zhang Y. X., Tan D. Q. The Optimal Decision-making of Monopoly Manufacturer under the Mixed Carbon Policy and Government Regulation Policy[J]. Management Review, 2022,34(2):303-314
[10] Cameron T. A. Individual Option Prices for Climate Change Mitigation[J]. Journal of Public Economics,2005,89(2-3):283-301
[11] Carson R. T., Louviere J. J.,Wei E. Alternative Australian Climate Change Plans:The Public's Views[J]. Energy Policy, 2010,38(2):902-911
[12] Hersch J., Viscusi W. K. The Generational Divide in Support for Environmental Policies:European Evidence[J]. Climatic Change, 2006,77(1):121-136
[13] 比尔·盖茨著,陈召强译. 气候经济与人类未来[M]. 北京:中信出版社, 2021 Bill G. How to Avoid a Climate Disaster[M]. Beijing:CITIC Publishing House, 2021
[14] 周鹏,周迅,周德群. 二氧化碳减排成本研究述评[J]. 管理评论, 2014,26(11):20-27 Zhou P., Zhou X., Zhou D. Q. A Survey of Studies on Estimating CO₂ Mitigation Costs[J]. Management Review, 2014,26(11): 20-27
[15] 田云,陈池波. 中国碳减排成效评估、后进地区识别与路径优化[J]. 经济管理, 2019,41(6):22-37 Tian Y., Chen C. B. Effectiveness Evaluation of Carbon Emission Reduction in China, Identification of Backward Areas and Path Optimization[J]. Business Management Journal, 2019,41(6):22-37
[16] Pizer W., Adler M., Aldy J., et al. Using and Improving the Social Cost of Carbon[J]. Science, 2014,346(6214):1189-1190
[17] Ackerman F., Stanton E. A. Climate Risks and Carbon Prices:Revising the Social Cost of Carbon[J]. Economics The Open Access Open-Assessment E-Journal, 2012,6(1):20120010
[18] Rennert K., Errickson F., Prest B. C.,et al. Comprehensive Evidence Implies a Higher Social Cost of CO₂[J]. Nature, 2022, 610(7933):687-692
[19] Moss R. H., Edmonds J. A., Hibbard K. A., et al. The Next Generation of Scenarios for Climate Change Research and Assessment[J]. Nature, 2010,463(7282):747-756
[20] Van Vuuren D. P., Riahi K., Moss R., et al. A Proposal for a New Scenario Framework to Support Research and Assessment in Different Climate Research Communities[J]. Global Environmental Change-Human and Policy Dimensions, 2012,22(1):21-35
[21] Riahi K.,Van Vuuren D. P., Kriegler E., et al. The Shared Socioeconomic Pathways and Their Energy, Land use, and Greenhouse Gas Emissions Implications:An Overview[J]. Global Environmental Change-Human and Policy Dimensions, 2017,(42): 153-168
[22] Van Vuuren D. P., de Vries B., Beusen A., et al. Conditional Probabilistic Estimates of 21st Century Greenhouse Gas Emissions Based on the Storylines of the IPCC-SRES Scenarios[J]. Global Environmental Change-Human and Policy Dimensions, 2008,18(4):635-654
[23] Weyant J. P. Costs of Reducing Global Carbon Emissions[J]. Journal of Economic Perspectives, 1993,7(4):27-46
[24] Clarke L., Edmonds J., Krey V., et al. International Climate Policy Architectures:Overview of the EMF 22 International Scenarios[J]. Energy Economics, 2009,31:64-81
[25] Foley D. K., Rezai A., Taylor L. The Social Cost of Carbon Emissions:Seven Propositions[J]. Economics Letters, 2013,121(1):90-97
[26] Golosov M., Hassler J., Krusell P., et al. Optiamal Taxes on Fossil Fuel in General Equilibrium[J]. Econometrica, 2014,82(1):41-88
[27] Van den Bijgaart I., Gerlagh R., Liski M. A. Simple Formula for the Social Cost of Carbon[J]. Journal of Environmental Economics and Management, 2016,77:75-94
[28] 魏一鸣,米志付,张皓. 气候变化综合评估模型研究新进展[J]. 系统工程理论与实践, 2013,33(8):1905-1915 Wei Y. M., Mi Z. F., Zhang H. Progress of Integrated Assessment Models for Climate Policy[J]. Systems Engineering-Theory & Practice, 2013,33(8):1905-1915
[29] Nordhaus W. D. Revisiting the Social Cost of Carbon[J]. Proceedings of the National Academy of Sciences of the United States of America, 2017,114(7):1518-1523
[30] Nordhaus W. D. Evolution of Modeling of the Economics of Global Warming:Changes in the DICE Model, 1992-2017[J]. Climatic Change, 2018,148(4):623-640
[31] Tol R. S. J. Safe Policies in an Uncertain Climate:An Application of FUND[J]. Global Environmental Change-Human and Policy Dimensions, 1999,9(3):221-232
[32] Link P. M., Tol R. S. J. Possible Economic Impacts of a Shutdown of the Thermohaline Circulation:An Application of FUND [J]. Portuguese Economic Journal, 2004,3(2):99-114
[33] Tol R. S. J. The Double Trade-off between Adaptation and Mitigation for Sea Level Rise:An Application of FUND[J]. Mitigation and Adaptation Strategies for Global Change, 2007,12(5):741-753
[34] Narita D., Tol R. S. J., Anthoff D. Economic Costs of Extratropical Storms under Climate Change:An Application of FUND[J]. Journal of Environmental Planning and Management, 2010,53(3):371-384
[35] Ackerman F., Munitz C. Climate Damages in the FUND Model:A Disaggregated Analysis[J]. Ecological Economics, 2012,77: 219-224
[36] Anthoff D., Tol R. S. J. The Uncertainty about the Social Cost of Carbon:A Decomposition Analysis Using Fund[J]. Climatic Change, 2013,117(3):515-530
[37] Anthoff D.,Tol R. S. J. The Climate Framework for Uncertainty, Negotiation and Distribution (FUND):Technical Description, Version 38[J]. FUND Doc, 2014,(6):1-26
[38] Waldhoff S., Anthoff D., Rose S., et al. The Marginal Damage Costs of Different Greenhouse Gases:An Application of FUND [J]. Economics-the Open Access Open-Assessment E-Journal, 2014,(8):20140031
[39] Hope C., Anderson J., Wenman P. Policy Analysis of the Greenhouse Effect:An Application of the PAGE Model[J]. Energy Policy, 1993,21(3):327-338
[40] Plambeck E. L., Hope C. PAGE95:An Updated Valuation of the Impacts of Global Warming[J]. Energy Policy, 1996,24(9): 783-793
[41] Hope C. The Marginal Impact of CO₂ from PAGE2002:An Integrated Assessment Model Incorporating the IPCC's Five Reasons for Concern[J]. Integrated Assessment Journal, 2006,6(1):19-56
[42] Hope C. The Social Cost of CO₂ from the PAGE09 Model[R]. Economics Discussion Paper, 2011,39:1-32
[43] Wei Y. M., Han R., Liang Q. M., et al. An Integrated Assessment of INDCs under Shared Socioeconomic Pathways:An Implementation of C3IAM[J]. Natural Hazards, 2018,92(2):585-618
[44] Yang P.,Yao Y. F., Mi Z., et al. Social Cost of Carbon under Shared Socioeconomic Pathways[J]. Global Environmental Change-Human and Policy Dimensions, 2018,53:225-232
[45] Duan H. B., Zhou S., Jiang K. J., et al. Assessing China's Efforts to Pursue the 15℃ Warming Limit[J]. Science, 2021,372(6540):378-385
[46] Cai Y., Lontzek T. S. The Social Cost of Carbon with Economic and Climate Risks[J]. Journal of Political Economy, 2019,127(6):2684-2734
[47] Rode A., Carleton T., Delgado M., et al. Estimating a Social Cost of Carbon for Global Energy Consumption[J]. Nature, 2021, 598(7880):308-314
[48] Kaufman N., Barron A. R., Krawczyk W., et al. A Near-term to Net Zero Alternative to the Social Cost of Carbon for Setting Carbon Prices[J]. Nature Climate Change, 2020,10(11):1010-1014
[49] van der Ploeg F., Rezai A. Optimal Carbon Pricing in General Equilibrium:Temperature Caps and Stranded Assets in an Extended Annual DSGE Model[J]. Journal of Environmental Economics and Management, 2021,110:102522
[50] Wagner G., Anthoff D., Cropper M., et al. Eight Priorities for Calculating the Social Cost of Carbon[J]. Nature, 2021,590(7847):548-550
[51] 潘晨,李善同,何建武,等. 考虑省际贸易结构的中国碳排放变化的驱动因素分析[J]. 管理评论, 2023,35(1):3-15 Pan C., Li S. T., He J. W., et al. Analysis of the Driving Forces of Changes in China's CO₂ Emissions Considering Inter-provincial Trade Structure[J]. Management Review, 2023,35(1):3-15
[52] 刘红光,张子孟,郭杰. 中国区域间价值链中隐含的碳排放转移研究[J]. 管理评论, 2021,33(9):58-64 Liu H. G., Zhang Z. M., Guo J. Carbon Emissions Embodied in Added-value Chains in China[J]. Management Review, 2021, 33(9):58-64
[53] Anthoff D., Emmerling J. Inequality and the Social Cost of Carbon[J]. Journal of the Association of Environmental and Resource Economists, 2019,6(2):243-273
[54] 威廉·诺德豪斯,约瑟夫·博耶著.梁小民译. 变暖的世界[M]. 上海:东方出版中心, 2021 William N., Joseph B. Translated by Liang X. M. A Warming World[M]. ShangHai:Orient Publishing Center, 2021
[55] Ricke K., Drouet L., Caldeira K., et al. Country-level Social Cost of Carbon[J]. Nature Climate Change, 2018,8(10):895-900
[56] Anthoff D., Hepburn C., Tol R. S. J. Equity Weighting and the Marginal Damage Costs of Climate Change[J]. Ecological Economics, 2009,68(3):836-849
[57] Arrow K., Cropper M., Gollier C., et al. Determining Benefits and Costs for Future Generations[J]. Science, 2013,341(6144): 349-350
[58] 刘昌义,何为. 不确定条件下的贴现理论与递减贴现率[J]. 经济学家, 2015,(3):65-73 Liu C. Y., He W. Discount Theory and Decreasing Discount Rate in Uncertainty[J]. Economist, 2015,(3):65-73
[59] Stern N. The Economics of Climate Change[M]. Cambridge, UK:Cambridge University Press, 2007
[60] Fankhauser S., Tol R. S. J., Pearce D. W. The Aggregation of Climate Change Damages:A Welfare Theoretic Approach[J]. Environmental and Resource Economics, 1997,10(3):249-266
[61] Nordhaus W. D. Projections and Uncertainties about Climate Change in an Era of Minimal Climate Policies[J]. American Economic Journal:Economic Policy, 2018,10(3):333-360
[62] Weitzman M. L. Fat Tails and the Social Cost of Carbon[J]. American Economic Review, 2014,104(5):544-546
[63] Howard P., Schwartz J. Think Global:International Reciprocity as Justification for a Global Social Cost of Carbon[J]. Columbia Journal of Environmental Law, 2016,(42):204-294
[64] IPCC. Climate Change 2007-Mitigation of Climate Change[R]. Intergovernmental Panel on Climate Change, 2007
[65] IPCC. Climate Change 2014-Synthesis Report[R]. Intergovernmental Panel on Climate Change, 2014
[66] IWG. Technical Support Document:Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866(May 2013, Revised August 2016)[R]. Interagency Working Group on Social Cost of Carbon, 2016
[67] Aldy J. E., Atkinson G., Kotchen M. J. Environmental Benefit-cost Analysis:A Comparative Analysis between the United States and the United Kingdom[J]. Annual Review of Resource Economics, 2021,13:267-288
[68] Clarkson R., Deyes K. Estimating the Social Cost of Carbon Emissions[M]. London:HM Treasury, 2002
[69] Downing T. E., Anthoff D., Butterfield R., et al. Social Cost of Carbon:A Closer Look at Uncertainty[R]. Report to the Department for Environmental Affairs and Rural Food, UK, 2005
[70] DECC UK. Carbon Valuation in UK Policy Appraisal:A Revised Approach[R]. Climate Change Economics, Department of Energy and Climate Change, UK, 2009
[71] DBEI UK. Updated Short-term Traded Carbon Values[R]. Department for Business, Energy and Industrial Strategy, UK, 2019
[72] National Treasury. Republic of South Africa. Discussion Paper for Public Comment:Reducing Greenhouse Gas Emissions:The Carbon Tax Option[R]. Tshwane:National Treasury, 2010
[73] Pillay S., Buyes P. Carbon Tax Pricing and the Social Cost of Carbon:The Case in the South African Motor Vehicle Manufacturing Industry[J]. Journal of Applied Business Research, 2013,29(6):1751-1762
[74] IMF. Global Fossil Fuel Subsidies Remain Large:An Update Based on Country-level Estimates[R]. International Monetary Fund, 2019
[75] World Bank. State and Trends of Carbon Pricing 2022[R]. World Bank, 2022